LOANS (Tables)

6 Months Ended

Jun. 30, 2019

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles, for the six months ended June 30, 2019:



	Residential			Commercial			Corporate			Total
	(dollars in thousands)
Beginning balance January 1, 2019	$	1,359,806		$	1,338,987		$	1,887,182		$	4,585,975
Purchases	1,111,264			228,379			250,492			1,590,135
Sales and transfers⁽¹⁾	(1,297,622		)	(834,492		)	(237,138		)	(2,369,252		)
Principal payments	(113,660		)	(63,167		)	(87,242		)	(264,069		)
Gains / (losses)	2,211			(5,703		)	3,635			143
(Amortization) / accretion	(875		)	1,597			2,814			3,536
Ending balance June 30, 2019	$	1,061,124		$	665,601		$	1,819,743		$	3,546,468

⁽¹⁾ Includes securitizations, syndications and transfers to securitization vehicles.

Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio

The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at June 30, 2019 and December 31, 2018:



	June 30, 2019		December 31, 2018
	(dollars in thousands)
Fair value	$	3,168,105	$	2,454,637
Unpaid principal balance	$	3,076,415	$	2,425,657

Summary of Comprehensive Income (Loss)

and 2018 for these investments:



	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(dollars in thousands)
Interest income	$	35,025		$	15,784		$	65,016		$	29,279
Net gains (losses) on disposal of investments	(4,605		)	(3,191		)	(9,828		)	(4,949		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	25,891			(1,305		)	43,712			(11,169		)
Total included in net income (loss)	$	56,311		$	11,288		$	98,900		$	13,161

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at June 30, 2019 and December 31, 2018 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:



Geographic Concentrations of Residential Mortgage Loans
June 30, 2019		December 31, 2018
Property location	% of Balance	Property location	% of Balance
California	52.5%	California	53.7%
New York	10.1%	Florida	7.1%
Florida	6.2%	New York	6.6%
All other (none individually greater than 5%)	31.2%	All other (none individually greater than 5%)	32.6%
Total	100.0%		100.0%

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the credit facility VIEs, OBX Trusts and CLO, at June 30, 2019 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk



Commercial Trusts					Residential Trusts
Property Location	Principal Balance		% of Balance		Property Location	Principal Balance		% of Balance
(dollars in thousands)
California	$	492,586	22.7	%	California	$	39,860	42.4	%
Texas	473,786		21.9	%	Texas	13,168		14.0	%
Florida	143,025		6.6	%	Illinois	7,148		7.6	%
Other ⁽¹⁾	1,058,775		48.8	%	Washington	6,452		6.9	%
Total	$	2,168,172	100.0	%	Other⁽¹⁾	27,293		29.1	%
					Total	$	93,921	100.0	%

⁽¹⁾

No individual state greater than 5%.

Residential Mortgage Loans

and December 31, 2018:



	June 30, 2019		December 31, 2018
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$0 - $3,448	$455	$0 - $3,500	$457
Interest rate	2.00% - 9.25%	5.07%	2.00% - 7.75%	4.72%
Maturity	1/1/2028 - 5/1/2059	11/4/2046	1/1/2028 - 11/1/2058	1/11/2046
FICO score at loan origination	505 - 823	753	505 - 823	752
Loan-to-value ratio at loan origination	8% - 116%	67%	8% - 111%	68%

Commercial Real Estate Investments Held for Investment

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. Additionally, the Company consolidates a collateralized financing entity that securitized prime adjustable-rate jumbo residential mortgage loans. The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.

At June 30, 2019 and December 31, 2018, commercial real estate investments held for investment were comprised of the following:



	June 30, 2019						December 31, 2018
	Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾		Outstanding Principal		Carrying Value ⁽¹⁾		Percentage of Loan Portfolio ⁽²⁾
	(dollars in thousands)
Senior mortgages	$	351,907	$	350,398	24.6	%	$	988,248	$	981,202	75.6	%
Senior securitized mortgages ⁽³⁾	795,052		789,900		55.6	%	—		—		—	%
Mezzanine loans	282,955		273,307		19.8	%	319,663		315,601		24.4	%
Total	$	1,429,914	$	1,413,605	100.0	%	$	1,307,911	$	1,296,803	100.0	%


⁽¹⁾	Carrying value includes unamortized origination fees of $7.1 million and $7.6 million at June 30, 2019 and December 31, 2018, respectively.


⁽²⁾	Based on outstanding principal.


⁽³⁾	Assets of a consolidated VIE.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at June 30, 2019 and December 31, 2018:



June 30, 2019
	Senior Mortgages			Senior Securitized Mortgages ⁽¹⁾			Mezzanine Loans			Total
	(dollars in thousands)
Net carrying value (January 1, 2019)	$	981,202		$	—		$	315,601		$	1,296,803
Originations & advances (principal)	210,551			840,052			19,185			1,069,788
Principal payments	(15,663		)	(45,000		)	(47,218		)	(107,881		)
Transfers	(831,229		)	—			(8,675		)	(839,904		)
Net (increase) decrease in origination fees	4,240			(6,564		)	(184		)	(2,508		)
Amortization of net origination fees	1,297			1,412			301			3,010
Allowance for loan losses	—			—			(5,703		)	(5,703		)
Net carrying value (June 30, 2019)	$	350,398		$	789,900		$	273,307		$	1,413,605



December 31, 2018
	Senior Mortgages			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Net carrying value (January 1, 2018)	$	625,900		$	394,442		$	8,985		$	1,029,327
Originations & advances (principal)	575,953			52,224			—			628,177
Principal payments	(216,849		)	(127,575		)	(9,000		)	(353,424		)
Net (increase) decrease in origination fees	(6,624		)	(370		)	—			(6,994		)
Amortization of net origination fees	2,822			376			15			3,213
Allowance for loan losses	—			(3,496		)	—			(3,496		)
Net carrying value (December 31, 2018)	$	981,202		$	315,601		$	—		$	1,296,803

⁽¹⁾Assets of a consolidated VIE.

Schedule of Commercial Mortgage Loans Held for Investment

The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of June 30, 2019 and December 31, 2018.



June 30, 2019
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss		Total
(dollars in thousands)
Senior mortgages	$	351,907	24.6	%	$	221,112	$	22,766	$	43,639	$	64,390	$	—	$	—	$	351,907
Senior securitized mortgages⁽³⁾	795,052		55.6	%	439,395		203,464		152,193		—		—		—		795,052
Mezzanine loans	282,955		19.8	%	79,843		49,683		109,826		—		43,603		—		282,955
Total	$	1,429,914	100.0	%	$	740,350	$	275,913	$	305,658	$	64,390	$	43,603	—		$	1,429,914



December 31, 2018
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss		Total
(dollars in thousands)
Senior mortgages	$	988,248	75.6	%	$	653,066	$	215,792	$	55,000	$	64,390	$	—	$	—	$	988,248
Mezzanine loans	319,663		24.4	%	140,776		38,884		96,400		36,603		7,000		—		319,663
Total	$	1,307,911	100.0	%	$	793,842	$	254,676	$	151,400	$	100,993	$	7,000	$	—	$	1,307,911


⁽¹⁾	The Company rated one loan as of June 30, 2019 and two loans as of December 31, 2018 as Substandard. The Company evaluated whether an impairment exists and determined in each case that, based on quantitative and qualitative factors, the Company expects repayment of contractual amounts due.


⁽²⁾	The Company rated two loans as Doubtful and evaluated for impairment as of June 30, 2019. The Company rated one loan as Doubtful and evaluated for impairment as of December 31, 2018. The allowance for loan losses was $9.2 million and $3.5 million as of June 30, 2019 and December 31, 2018, respectively.


⁽³⁾	Assets of a consolidated VIE.

Schedule of Industry and Rate Attributes of Corporate Loans [Table Text Block]

The Company invests in corporate loans through its Annaly Middle Market Lending Group. The industry and rate attributes of the portfolio at June 30, 2019 and December 31, 2018 are as follows:



	Industry Dispersion
	June 30, 2019						December 31, 2018
	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
	(dollars in thousands)
Aircraft and parts	$	—	$	41,195	$	41,195	$	—	$	41,342	$	41,342
Arrangement of transportation of freight & cargo	—		—		—		—		21,632		21,632
Coating, engraving and allied services	—		51,625		51,625		—		57,223		57,223
Computer programming, data processing & other computer related services	—		331,192		331,192		—		242,185		242,185
Drugs	—		35,909		35,909		—		35,882		35,882
Electrical work	—		42,026		42,026		—		41,760		41,760
Electronic components & accessories	—		24,000		24,000		—		24,059		24,059
Engineering, architectural & surveying	—		92,486		92,486		—		80,748		80,748
Grocery stores	—		23,338		23,338		—		23,431		23,431
Insurance agents, brokers and services	—		48,361		48,361		—		48,942		48,942
Mailing, reproduction, commercial art and photography, and stenographic	—		14,779		14,779		—		14,843		14,843
Management and public relations services	—		330,459		330,459		—		487,046		487,046
Medical and dental laboratories	—		38,620		38,620		—		26,858		26,858
Metal cans & shipping containers	—		118,368		118,368		—		118,248		118,248
Miscellaneous business services	—		19,552		19,552		—		19,622		19,622
Miscellaneous equipment rental and leasing	—		49,689		49,689		—		49,552		49,552
Miscellaneous health and allied services, not elsewhere classified	—		75,910		75,910		—		56,003		56,003
Miscellaneous plastic products	—		10,000		10,000		—		9,953		9,953
Motor vehicles and motor vehicle equipment	—		—		—		—		16,563		16,563
Motor vehicles and motor vehicle parts and supplies	—		28,996		28,996		—		29,046		29,046
Nonferrous foundries (castings)	—		12,914		12,914		—		12,948		12,948
Offices and clinics of doctors of medicine	—		102,719		102,719		—		97,877		97,877
Offices of clinics and other health practitioners	—		20,992		20,992		—		21,100		21,100
Public warehousing and storage	—		82,912		82,912		—		84,278		84,278
Research, development and testing services	—		45,610		45,610		—		33,381		33,381
Schools and educational services, not elsewhere classified	—		19,678		19,678		—		19,805		19,805
Services allied with the exchange of securities	—		—		—		—		14,877		14,877
Surgical, medical, and dental instruments and supplies	—		97,113		97,113		—		96,607		96,607
Telephone communications	—		61,300		61,300		—		61,371		61,371
Total	$	—	$	1,819,743	$	1,819,743	$	—	$	1,887,182	$	1,887,182

Aggregate positions by Respective Place in the Capital Structure of the Borrowers

The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at June 30, 2019 and December 31, 2018.



	June 30, 2019		December 31, 2018
	(dollars in thousands)
First lien loans	$	1,196,198	$	1,346,356
Second lien loans	623,545		540,826
Total	$	1,819,743	$	1,887,182